Brad's Books and Organizations

Books

Books

Organizations

Organizations

Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

« swipe left for tags/categories

swipe right to go back »

RSS:Blog = HTTP:Web = SMTP:Email

Comments (14)

I’ve been having this weird conversation lately. Last week, it happened again when I was being interviewed for an article titled Betting on Tools that Power Blogs in Businessweek Online.

During the interview, the writer asked something like “so, why are you investing in this blogging thing where no one knows what the business model is yet.” My pithy reply, among others, was “Anybody in the industry who says people haven’t figured out how to make money on blogging is [are] being ridiculous.” After I hung up the phone, I went and banged my head against the wall a few times, fortunately missing the nail that was sticking out of a stud.

We’ve made three investments in RSS/blog related companies: NewsGator, Technorati, and MessageCast. NewsGator sells software. Technorati is a search engine. MessageCast is a next generation ESP (an email service provider, but for multiple channels such as Instant Messaging.) Another high profile blog investment that we aren’t a part of is Six Apart which – voila – sells software – either on a stand-alone license or a hosted basis. Oh – and they are starting to help bloggers monetize their traffic with paid ads.

Please tell me these are well understood business models. I mean, there are at least 10 (or is it 10,000) software companies in America at this point, even with Oracle’s best efforts to force consolidation. And search – well – even Microsoft is working on a search business. Last time I checked, there were even a number of on-demand (or hosted, or whatever you want to call them software businesses.)

As a VC who does a lot of software deals, I seem go through this every time there’s a new technology standard (or protocol) that catches fire. In the early 1990′s, SMTP enabled a raft of companies that built businesses around all aspects of Internet-based email. Shortly thereafter, HTTP enabled – well – an entire industry. SMTP and HTTP are really simple protocols (and – when they were first created – had a slow initial commercial adoptions that suddently went non-linear and became pervasive.) We are seeing exactly the same thing with RSS – and blogging is simply the first broad-based instantiation.

I’ve looked at a lot of RSS/blog related startups in the past 12 months. They bifurcate into two categories – those with a well-defined, easily understandible business model and those without. The vast majority – with a little effort – can fall into the first category. Now – like with everything – a bunch of the ideas are either stupid, small, or disorganized. But – once you filter these out – you are faced with traditional businesses based on a new emerging protocol. The good news – and the bad news – is we know how the game will play out – so with RSS it’ll just happen faster than with SMTP and HTTP. I expect the victors will be the early birds that have a combination of conviction, compentence, and agility.

Those that come up with “new business models” – please don’t call me.

  • http://www.webmail.us Pat Matthews

    Well said.

  • http://www.escalan.com/blog Derek Scruggs

    Google AdSense is the business model. I know a lot of people who are making a killing on AdSense.

    Well, sort of. “Killing” in the individual income sense, not in the VC 10x invested capital of > $1 million sense. Most of them have invested less than $500 getting started. Tools and services that help them make money will be in demand for a while. AdSense is great right now, but they’re nervous about being dependent on one “supplier” of revenue. If and when MSN comes out with their version, they’ll breathe a little easier.

  • ccouch

    Isn’t saying “bifurcate into two ..” redundant?

  • http://www.feld.com/blog Brad Feld

    Indeed it is. Indeed it is.

  • Dave Jilk

    When people say “haven’t figured out the business model,” it usually seems to mean something more like “haven’t figured out whether [enough] customers will pay for the product/service.” In the late 90s companies got in the habit of changing their business model (e.g., changing from a software product to consulting services, or whatever) when their sales didn’t take off, so it seemed like they were “trying to figure out a business model.”

  • http://furrier.typepad.com John Furrier

    I agree with you Brad but would add that the models are evolving and good companies will innovate with the growth some will not. My view is that being in the market today allows firms to help invent & innovate the future. That’s hard to do from the sidelines. So your point of filtering and choosing categorical proven business models is good enough today. Fine tuning them over time as the protocols evolve will determine which mgt teams and boards are smarter.

  • Nikhil Soman

    Agree with a lot of stuff you have said re Blogs and RSS as well your NewsGator investment decision.

    However, I believe the real power of both RSS and Blogs is still under appreciated. Most of the success these two technologies have seen is due to their basic nature of being participative media delivery vehicles.

    RSS has made it easy for people to cull out content of their interest and Blogs have enabled them to cast their opinions/comments or simply put “expression” of their views.

    However, it is still fairly difficult to post ones ideas and have people read(reach) them. Most of the content generated in communities still stays limited to those communities (Blogs) and can only be ‘found’ via Google.

    I think MessageCast will be a great way to extend these communities and their content.

    Another great way to jumpstart the same would be deeper integration with IM platforms that already have significant reach and are the most efficient reach extension vehicles for low-budget micro-communities.

  • http://www.yahoo.com efty

    but what is techorati’s business model? “real time web” is not a business model.

  • http://www.feld.com/blog Brad Feld

    Technorati is a “search engine.” The last time I checked, there were a number of very successful companies that have build real businesses around search engines (e.g. Google, Yahoo). The primary business model is – surprise – revenue from advertising. Interestingly, in the blog world, there are a number of secondary business models based on the nature of the data being indexed – but all are “pay for content” related.

  • http://blog.nooked.com/archives/2005/02/rss_feeds_attra_1.htm Nooked Blog

    RSS feeds attract venture dollars + Bloglines get acquired

    Check out this article from CNet News Update According to a post today (Saturday) on PaidContent, Bloglines has been acquired by AskJeeves. Update – Again Brad Feld at Mobius Venture Capital has a great post on RSS + investment I’ve…

  • John

    It’ll be interesting to see what happens when Google introduces a “search only blogs” option and kills Technorati with about 10 hours of coding.

  • Vidyuth Srinivasan

    Talking of google, have you wondered whether the MSFT/Yahoo merger, is a joint bid to curtail the possible threat that Google Talk could be growing to? We all know of microsoft’s worries (Google OS), but is this another market consolidation move by them or is it a sweeping statement directed towards google? Would also be interested to know the basic biz model that these ims work on.

  • Pingback: cheap auto insurance in miami

  • Pingback: Clearwater

Build something great with me